First steps to a new treaty

Officials from the European Union’s member states will work throughout January to agree the wording of an inter-governmental treaty aimed at increasing fiscal discipline.

Legal experts under Herman Van Rompuy, the president of the European Council, completed the first draft of the treaty, “an international agreement on a reinforced economic union”, on Friday (16 December), and the first meeting of a 100-strong working group to finalise the text took place in Brussels yesterday (20 December). It will meet again early in the new year.

Contrary to the ratification process for EU treaties, where unanimity is required, the inter-governmental treaty will need only nine of the 17 eurozone member states to ratify it before it comes into effect in those countries. It will not be blocked if only some countries reject it in referenda or in national parliaments.

Leaders of all EU member states – including the United Kingdom, which rejected a change to the EU’s treaties and refused to participate in the inter-governmental agreement – are expected to meet for a summit in Brussels at the end of January, by which time EU officials hope to have prepared a final version of the treaty.

Yesterday, Nick Clegg, the UK’s deputy prime minister, said that he expected the summit to take place on 27 January.

Once the final text is approved, EU officials hope that it can be signed by leaders of member states at the beginning of March.

Angry MEPs

MEPs criticised the proposed treaty for sidelining the European Parliament and undermining their work on the ‘six-pack’ of economic governance legislation, which was adopted only on 13 December after lengthy negotiation.

Fact File

Text at a glance

Draft international agreement on a reinforced economic union

Balanced budget rule: written into national constitutions or primary law.

Debt-to-gross-domestic product: if it exceeds 60%, member states have to reduce it at a rate of 1/20th a year.

Enforcement: Countries taking part “undertake to support proposals or recommendations” from the European Commission unless there is a qualified majority against.

A country can refer to the European Court of Justice a country that has failed to comply with deficit rules. The ECJ judgment is binding and countries will have to take measures to comply within a period set by the court.

Economic convergence: Countries “undertake to work jointly towards an economic policy fostering growth through enhanced convergence and competitiveness”. They say that they might use ‘enhanced co-operation’ on matters “for the smooth functioning of the eurozone without undermining the single market”.

Representatives of committees in charge of the economy and finance within national parliaments will meet regularly to discuss economic and budgetary policies “in close association” with representatives of the European Parliament’s economic and monetary affairs committee.

Summits of leaders of countries in the eurozone: to take place at least twice a year. Other member states to be kept closely informed of the outcome of euro summit meetings.

Working group

The meetings of the working group that will finalise the text of the inter-governmental treaty will be chaired by Georges Heinrich, the deputy chairman of the Eurogroup Working Group.

The Commission is represented by Luis Romero, the head of its legal service, and Marco Buti, the director-general of economic and monetary affairs.

Three MEPs, Elmar Brok, a centre-right German, Roberto Gualtieri, a centre-left Italian, and Guy Verhofstadt, a Belgian Liberal, will participate in the negotiations. Daniel Cohn-Bendit, a French Green MEP, has been named as a substitute.

Member states are represented by officials from the legal and finance departments of their governments. All 27 member states will be represented, including the UK, which, because it opted out of the treaty, has been granted only observer status. The UK said it wanted its officials to be present during the discussions to ensure that the new treaty did not endanger the City of London, where most of Europe’s financial services transactions take place.

Corien Wortmann-Kool, a Dutch centre-right MEP, said that the treaty draft was “a step back”.

“The current draft is unacceptable,” she said, adding that the treaty’s vagueness on the role of the European Commission and the Parliament was a cause for concern.

Sylvie Goulard, a French Liberal MEP, said that the text of the new treaty was “not what we need”.

“They are making the European Parliament disappear [from the process of scrutinising Commission recommendations on sanctioning member states],” she said: “If the Commission has made a mistake we need to debate that openly.”

Strict rules

The treaty draft contains the stricter rules on economic discipline that national leaders agreed at their summit on 8-9 December. It is still unclear how many non-eurozone countries will participate. However, the exclusion of specific proposals on tax harmonisation removes the greatest obstacle for the Czech Republic and Hungary.

Non-eurozone countries that sign up to the agreement will be subject to the new rules only when they adopt the euro. They can choose to apply the rules earlier if they wish.

A eurozone country that does not ratify the treaty will not be bound by the new rules. However, an EU official said that this would “make life politically very uncomfortable”.

Officials said they would still have preferred the new rules to be enshrined in a full-blown EU treaty to avoid the legal headache of ensuring that the new agreement does not contradict the EU’s existing rules.

One example of this is in the case of “increasing automaticity” of punishments for countries, once the Commission deems that deficit rules have been flouted. Under the agreement, these countries will be placed in the EU’s excessive deficit procedure unless a qualified majority of other member states blocks it – making this stringent process more likely to come into effect than under the current EU rules. At present, delinquent countries can be made subject to the excessive deficit procedure only if there is a qualified majority in support of such a move – much more difficult to attain. Member states are effectively signing up to agree to apply the tougher regime informally.

“The rule remains qualified majority voting,” an EU official said: “We keep the rule, but in practice we increase the standards and introduce a bigger element of automaticity.”